BUYING, SELLING, & GROWING YOUR BUSINESS
Do You Know What Your Business Is Worth?
Selling your business is unlike anything else you have ever sold. Without professional assistance the likelihood of obtaining maximum value is not in your favor. Think about it, how often do you sell your business? The answer is once! In most cases this is your single biggest asset. Attempting this without professional insight can be tricky.
Let’s talk about other big-ticket items you’ve sold. Real estate is the most similar in value. In most cases, you used a professional to help you with this. However, this transaction is much simpler than selling your business. Typically, you fix everything, repaint, and maybe even stage the property so it looks the best it can. Most of the time you may even have a reasonably good idea of its value in the marketplace.
But what about valuing your business? It's unique in so many ways, the market, the physical asset, your employees and how you compare to the competition to name a few. Assuming you could determine the value, how would you go about selling it? How would you find buyers? The process is almost the opposite of every other big-ticket items you’ve sold.
THE STEPS INVOLVED
WHEN SELLING YOUR BUSINESS
Let’s explore the difference between selling a business versus a home:
Fix it: Yes, with your home you fix everything that’s broken maybe even paint. When selling your business, you need to fix your financial statements. For years your goal as the business owner was to minimize tax liability and maximize your (the owners) income. We understand this and know how to restate sellers’ discretionary earnings to support business value.
Write up a description: How would you describe your business? Why is it so valuable? How do you compare to your competition? What are your earnings? Why are you selling it, and so on.
Advertise it: With a house its easy, you want everyone to know, you advertise it everywhere, the more the better. When selling a business this is not the same. Confidentiality is still the most important component. Would you know where to advertise it, or for that matter how? Who would handle the calls? You while you’re running your business? How would you keep it confidential?
Tell Everyone: When selling your house, you tell everyone. When selling a business confidentiality is key. Keeping employees in place adds value to your business.
Find a Buyer: Tires kickers show up in every sale. For your house, it doesn’t matter however for your business you want to be able to screen them before they get confidential information. Who will deal with the tire kickers? Are you qualified to determine if a buyer is ready, willing, and able?
Remove your belongings: By now you are getting the idea that selling a business is unlike any other asset you have sold. You don’t remove anything, in fact, key employees, business systems, and inventory are all part of what brings value to the deal, also known as Goodwill or Blue Sky.
Hand them the keys and leave: When selling your house you get the money, hand them the keys and it’s over. When selling your business, you as the owner and creator of everything will typically spoon feed the transfer of the asset and the systems to maintain the value for the new buyer. This transfer can be for a few weeks or even a few years.
WHAT NOT TO DO
Oftentimes when you're ready to sell, you've waited too long, and just want out. This is the time that you need patience. However, patience is hard to find.
Some business owners start the process of selling before they are ready. What they do is put it up for sale as a market test to see if they get any interest. More times than not they list it for a higher price than the business is worth in hopes of a big payoff. Ultimately this action devalues the business, sometimes substantially.
Unlike selling a house, a business has a much smaller pool of buyers. These buyers are more savvy in the market for your type of business. As a result, normally they are versed in their approximate value. If they see an advertised business overpriced they just take a pass or worse yet, they will call for some information to complete due diligence and now they have confidential information about your business without any real intention to buy it.